The magnitude of the slope of the budget line is determined by
A) the marginal rate of substitution.
B) the level of income.
C) the consumer's preferences for the goods.
D) relative prices.

Question

Quizplus · Accepted Answer

The magnitude of the slope of the budget line is determined by relative prices, as it reflects the rate at which one good can be exchanged for the other. This relationship between prices is represented by the slope of the budget line, which is measured by the ratio of the price of one good to the price of the other. Therefore, changes in relative prices will affect the slope of the budget line and the amount of goods that can be purchased with the given budget constraint. The other options, such as the marginal rate of substitution, income levels, or consumer preferences, may affect the shape and position of the budget line, but not the magnitude of its slope.

The Magnitude of the Slope of the Budget Line Is